Fonterra chair John Wilson said while global milk prices remained at unrealistically low levels, global milk production had declined.

"Milk production is reducing in most dairying regions globally in response to low milk prices and this is bringing the world's milk supply and demand back into balance. Milk production in the EU is now in decline and our New Zealand milk collection at this early stage is around four per cent lower for the year to date."

Mr Wilson warned while prices had risen sharply, the high New Zealand dollar had offset some of those gains.

"We expect the dairy market to be volatile over the coming months and will continue to keep our forecast updated for our farmers as we move into the season," he said.

While it's still early in the season, if that price holds it means farmers would be on the cusp of breaking-even after two seasons of low prices.

Economists are urging caution for now.

"There was a similar surge of buying around this time last year which proved to be short-lived. Global milk production has fallen in recent months in response to low prices, but it remains at elevated levels," Westpac acting chief executive Michael Gordon said.

But analysts do expect milk prices to recover over the season.

Westpac recently revised its milk price forecast upwards to $5 per kilo, while BNZ lifted its estimate to $5.30 a kilo.